Electric dereg plan favors renewable fuels

Oil and gas associations are wary of the renewable fuels mandate in the Clinton administration's retail electricity restructuring plan. The administration said its proposed legislation would allow customers to choose their electricity suppliers by 2003, but it also would allow states to opt out of competition if they believe that their residents would be better off under the status quo. Legislation is not expected to be passed in the remaining months of the 105th Congress.

May 11, 1998

5 min read

Oil and gas associations are wary of the renewable fuels mandate in the Clinton administration's retail electricity restructuring plan.

The administration said its proposed legislation would allow customers to choose their electricity suppliers by 2003, but it also would allow states to opt out of competition if they believe that their residents would be better off under the status quo.

Legislation is not expected to be passed in the remaining months of the 105th Congress.

Energy Sec. Federico Pe?a noted, "Sixteen states have already moved to provide for electricity industry competition. There are, however, issues that only the federal government can deal with.

"Federal legislation can modify or repeal outdated federal laws, cover regional electricity markets, address concerns about market power, ensure that the interstate electricity grid is reliable, and establish uniform standards for utility suppliers. We want to work with Congress to get comprehensive legislation that benefits all consumers."

What it does

Besides allowing customers choice by 2003, the administration's plan supports stranded-cost recovery for utilities that might not otherwise be able to recover the costs of past investments that are no longer economic.

It would require all participants in physical electricity transactions on the grid to comply with mandatory standards.

The plan would give the Federal Energy Regulatory Commission the authority to require transmitting utilities to turn over their operational control of transmission facilities to an independent system operator.

All utilities would be required to disclose information about the services they offer so that customers could "comparison-shop."

The plan establishes a "renewable portfolio standard" to ensure that at least 5.5% of all electricity sales include generation from renewable energy sources by 2010.

"This would double the projected amount of energy from nonhydroelectric renewable resources such as wind, solar, and biomass. If companies cannot generate power from their own renewable sources, they can purchase credits from those who exceed their targets," DOE said.

The administration said its proposal would give power generators "increased economic incentives to cut the two thirds of energy currently wasted in fossil-fuel electricity generation."

It would establish a $3 billion/year fund to provide grants for low-income assistance, energy-efficiency programs, research and development, and renewable technologies.

The Environmental Protection Agency would be given authority to provide interstate NOx trading authority (see story, p. 44).

And the proposal calls for the repeal of the Public Utility Holding Company Act and the "must buy" provision of the Public Utility Regulatory Policies Act.

Oil and gas groups

The Natural Gas Supply Association objected to the 5.5% mandate for renewables.

NGSA Pres. Nicholas Bush said the proposal was "a government attempt of market manipulation, to the detriment of both the economy and the environment."

NGSA said that, last year, the Energy Information Administration reported that a 5% renewables mandate would cost U.S. consumers $2 billion/year and reduce potential natural gas growth by 5%.

Bush said, "Electricity restructuring promises to save consumers money while letting them compare providers and choose the ones that best suit their needs.

"Fuel mandates like the one the administration proposed would not grant that choice to fuel generators nor, ultimately, to consumers."

The Independent Petroleum Association of America said it advocates electricity competition but also opposes the renewable fuels mandate.

"This mandate undermines the concept of competition and gives economically inefficient energy sources of electricity generation a free ride on the back of the consumer.

"This guaranteed market share would come at the expense of other fuels, such as abundant natural gas, which is a proven cost-effective, efficient, and environmentally friendly source of electricity generation."

Other views

Sen. Frank Murkowski (R-Alas.), Energy Committee chairman, said the administration was correct in not imposing more federal mandates on the states. But he said the bill neglects nuclear and hydropower and would create a $3 billion/year fund to support nonmarket energy programs.

Murkowski said, "Any costs that are mandated by the federal government on electric power providers will pass directly on to the consumer, including this new $3 billion tax. We must remember the objective behind electricity deregulation is to reduce the rates for consumers."

Rep. Tom Bliley (R-Va.), Commerce Committee chairman, welcomed the administration's proposal. But, like Murkowski, he complained that the administration did not submit legislative language.

Bliley said, "The devil is in the details, so I want to read the fine print when the administration finishes its work, but there seem to be some good points in the principles."

The Global Climate Change Coalition was pleased that the administration did not propose a CO2 emissions limit for electricity generation.

But it said, "We are concerned that the administration proposal includes many back-door provisions such as a cap on nitrogen oxides and forced expansion of renewable energy sources. And it is quite clear they have every intention of including a carbon dioxide cap over the next few years."

The Union of Concerned Scientists argued there should be a cap. And it said the administration should have required more use of renewables.

"The proposed target of 5.5% by 2010 is not enough to significantly expand the use of renewable energy technologies or capture the full value of the environmental benefits they would bring."

The Edison Electric Institute said it was pleased the plan would repeal outmoded utility laws but it complained it "would significantly broaden'' federal powers over utility mergers and could force utilities to sell off operations.